Magazine

A Crusader in Hong Kong

May 18, 2003

He's intense, sometimes acerbic, and has a hard time with small talk. "He gets up people's noses," says a leading fund manager in Hong Kong. And even David Webb's friends joke that he's something of a nerd.

But there's no question that the slightly built British native is a menace to business as usual at Hong Kong's clubby stock exchange. Like a poacher-turned-gamekeeper, the 37-year-old former investment banker knows the tricks of the financial trade as only an insider can. And in the five years since he left banking to invest for his own account, Webb has almost single-handedly changed the terms of the corporate governance debate in Hong Kong. To boost returns on his investments and put a spotlight on Corporate Hong Kong, Webb has publicized all the fudged numbers and sleights of hand he finds in the accounts of city companies. Webb's triumphs are chronicled online at Webb-site.com, which boasts 8,500 subscribers. "The Internet has democratized publishing," says Webb. "Before, I had to write letters to newspapers."

Fat cats hate him; investors love him. Now, Hong Kong has decided to reward the nettlesome Webb by giving him a high profile job. In mid-April, he was elected to the board of Hong Kong Exchanges & Clearing Ltd., the publicly listed company that runs the Stock Exchange of Hong Kong. The election of Webb and Oscar Wong, CEO of BOC-Prudential Asset Management Ltd., breaks the stranglehold Hong Kong's brokers had on the exchange's board. Now that he has a seat at the table, Webb allows that "management might have to listen a little more carefully." He has his shopping list ready: better rules governing initial public offerings, shareholder democracy, and an improved system for voting stocks.

Webb also wants the stock exchange to lose its status as a frontline regulator -- a role he thinks it has misused and no longer deserves now that it is a private company. "You can't have rabbits guarding the lettuce," says Webb. A blue-ribbon panel recommended in March that the Securities & Futures Commission take over that power. Fierce lobbying by the exchange has put that on hold.

Other Webb goals: promoting the election of independent directors to company boards; reforming rubber-stamp shareholder voting procedures; and the legalization of class actions against mismanaged companies. As it is now, the families that control most Hong Kong companies simply appoint directors and railroad their formal elections through at shareholder meetings. To force real votes, Webb launched Project Poll in time for this spring's chain of annual meetings. After buying shares in each of the 33 Hang Seng index companies, he has been attending meetings and demanding formal votes on all proposals. Another Webb initiative, dubbed Project Vampire, seeks to thwart companies trying to push through resolutions that allow for massive share dilutions.

Some people think Webb might do better with more tact. Others think that the hard-nosed approach is the only way to get change. "He has been terrific, at the forefront of pushing corporate governance in Hong Kong," says Mark Mobius, president of Templeton Emerging Markets Fund. "He pulls no punches." Webb's influence is all the more remarkable given the shoestring nature of his operation, which he runs from a spare room in his rented apartment with an assistant. "It's pleasing to see democracy in action in Hong Kong," Webb says. And from his new perch on the stock exchange board, Webb has even more power to put corporate democracy into practice. By Mark L. Clifford in Hong Kong